As the percentage of retired Baby Boomers is expected to explode over the next decade, the demand for assisted living and long-term care facilities will naturally have a parallel effect.
Today, the senior housing industry is considered one of the fastest growing real estate investment opportunities in the national housing market.
In 2003, Warren Buffett proved to be way ahead of the curve, when he purchased Clayton Homes — now the largest builder of mobile homes — for an estimated $1.7 billion.
The senior housing industry has an estimated market value of more than $300 billion annually. And the PEW Research Center has shown that the average return on investment for the senior housing industry, significantly outperforms all others within the real estate sector.
In the past, senior housing has been a very resilient part of the housing demand, with occupancy rates trending around 90 percent. Even during the recent “Great Recession” occupancy rates in the senior housing industry remained consistently above 85 percent.
On average, assisted living homes costs between $3,000 to $5,000 per month, per tenant, and can accommodate from 8 to 16 residents per unit, depending on state regulations.
But even with their generally higher education and income levels, many of these future residents will be unable to afford the luxury of paying for quality assisted care.
The average Baby Boomer household, ages 56-to 61-years-old, has about $164,000 saved for retirement, according to a report by the Economic Policy Institute. That amounts to around $8,200 a year, or only $680 a month, to supplement Social Security or other retirement income.
However, the median Baby Boomer retirement savings for the same age group is only $17,000, which is far less than the average household. So in reality, the future for many Baby Boomers approaching retirement is much more grim.
In the same report, an estimated 41 percent of households (ages 55-to 64-years-old) have no retirement savings set aside, whatsoever.
Although the Boomers approaching retirement are generally too young to need assisted-living, (the average resident age being 84) they are already having an impact on that market.
“Assisted living facilities have a projected 30 percent growth rate over the next 10 years, and are selling 18 percent faster today due to a lack of inventory,” said Daniel Summers, CEO of RealtyeVest, a real estate investment company that specializes in raising capital for assisted living and affordable housing.
While the above average income Baby Boomer will continue to push the assisted living capacity demands through 2030, the remaining will be searching for an alternative to assisted living by downsizing to affordable homes.
“Developers are recognizing the growing demand for affordable housing, and have begun aggressively acquiring and upgrading communities across the United States,” Summers said.
“And many retirees are trading in their homes for RVs and moving into 55-plus mobile home communities.”
“If you’re a Baby Boomer on a fixed or limited income you can rent or sell your larger site-built home and purchase an RV or mobile home and move to the retirement location of your choice,” Summers said.